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Business Bankruptcy Issues Recent Developments

U.S. Supreme Court Denies Review In Jaffe v. Samsung, Letting Stand The Fourth Circuit’s Decision Applying Section 365(n) To Protect Licensees In A Chapter 15 Bankruptcy Case

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On Monday, October 6, 2014, the U.S. Supreme Court issued an order denying the petition for a writ of certiorari in the Jaffe v. Samsung case, also known as the Qimonda case. The Supreme Court let stand the Fourth Circuit’s December 2013 decision that affirmed the bankruptcy court’s order applying Bankruptcy Code Section 365(n) in a Chapter 15 cross-border bankruptcy case.

For a full discussion of the Fourth Circuit’s decision, follow the link to this prior post discussing the case and its implications for intellectual property licensees, Chapter 15 cases, and more. For a quick refresher, here’s the conclusion from that earlier post:

The Fourth Circuit’s Qimonda decision is important for licensees of intellectual property owned by a foreign entity. It signals that U.S. courts will incline to protect licensees by applying Section 365(n) when an insolvent foreign entity’s administrator or other representative asks for assistance from the U.S. bankruptcy courts. However, the Fourth Circuit did not go as far as some licensees would have liked, stopping short of declaring that an attempt to reject licenses without applying Section 365(n) would be “manifestly contrary” to U.S. public policy. That makes the Qimonda decision a helpful, but perhaps not decisive, tool for IP licensees. It of course remains to be seen whether other courts will follow the Qimonda decision or chart a different path.

Image Courtesy of Flickr by Phil Roeder

Business Bankruptcy Issues Recent Developments

When Worlds Collide, The Sequel: Fourth Circuit Rules On Section 365(n)’s IP Licensee Protections In Chapter 15 Cross-Border Bankruptcy

My how time flies in protracted bankruptcy litigation. More than four years ago, as I reported back at the time, the Bankruptcy Court in the Chapter 15 cross-border bankruptcy case of Qimonda AG issued its first decision on the application of Section 365(n) in that case. After an initial appeal, a four-day trial on remand, and another appeal, last week the U.S. Court of Appeals for the Fourth Circuit issued a major decision that may bring the litigation to a close.

Even if you are not a Chapter 15 bankruptcy aficionado, this decision has important implications for licensees of intellectual property, especially when the IP owner is a foreign entity.

Before diving into the Fourth Circuit’s decision and examining where the decision leaves licensees, let’s first take a look at Section 365(n), Chapter 15, and the long and winding road that led to the Fourth Circuit’s decision. Or, if so inclined, you can just jump to the discussion of the Fourth Circuit’s decision and where it leaves licensees, found toward the end of this post.

Section 365(n) And Licensee Rights. Section 365(n) was added to the Bankruptcy Code to protect licensees of intellectual property in the event the licensor files bankruptcy.

  • Under Section 365(n), if the debtor or trustee rejects a license, a licensee can elect to retain its rights to the licensed intellectual property, including a right to enforce an exclusivity provision. In return, the licensee must continue to make any required royalty payments.
  • The licensee also can retain rights under any agreement supplementary to the license, which should include source code or other forms of technology escrow agreements.
  • Taken together, these provisions protect a licensee from being stripped of its rights to continue to use the licensed intellectual property.
  • For more on Section 365(n)’s benefits and protections, follow the link in this sentence.

Limits Of Section 365(n). These protections, however, have their limits. One is that the Bankruptcy Code’s special definition of “intellectual property” excludes trademarks from the scope of Section 365(n)’s protections (although at least one recent decision may have opened an alternative path for trademark licensees to retain their rights). Another is that Section 365(n) is in the U.S. Bankruptcy Code and applies only in a U.S. bankruptcy case. Most other countries do not have protections similar to Section 365(n).

Chapter 15 Bankruptcy. Chapter 15 allows a foreign entity’s official representative to obtain U.S. bankruptcy protection for assets and interests in the United States, ancillary to the insolvency proceedings in the entity’s home country. It was was added to the Bankruptcy Code to implement certain cross-border insolvency procedures when corporations or others have assets and interests in more than one country. To read more on Chapter 15 bankruptcy, follow the link in this sentence.

Does Section 365(n) Apply In Chapter 15 Cases? An open question has been what would happen if a foreign licensor were the subject of a cross-border case under Chapter 15 of the U.S. Bankruptcy Code. Would Section 365(n) apply to protect licensees in a Chapter 15 proceeding?

  • In the Qimonda case, the two worlds collided — Chapter 15’s cross-border bankruptcy procedures and Section 365(n)’s protections for IP licensees.
  • The first bombshell came in November 2009. Judge Robert G. Mayer of the U.S. Bankruptcy Court for the Eastern District of Virginia issued an initial decision, holding that Section 365(n)’s protections did not apply in the Chapter 15 case, starting the four-year journey to the Fourth Circuit’s decision.

The Qimonda Chapter 15 Case. Qimonda, a German company that manufactured semiconductor devices, was in an insolvency proceeding in Germany. The principal assets of Qimonda’s estate were approximately 10,000 patents, of which roughly 4,000 were U.S. patents. It had issued licenses of rights under those U.S. patents to third party licensees. Qimonda’s German insolvency administrator had filed the Chapter 15 case to seek recognition by the Bankruptcy Court of the pending German insolvency proceeding as a “foreign main proceeding.” The Bankruptcy Court granted recognition and, at the request of the administrator, granted him discretionary relief under Section 1521(a)(5) of the Bankruptcy Code, entrusting to him the administration of all of Qimonda’s assets within the United States, primarily the 4,000 U.S. patents. In its supplemental order granting relief under Section 1521, the Bankruptcy Court on its own provided that, among other things, Section 365 of the U.S. Bankruptcy Code would apply to the Chapter 15 case (it does not apply automatically in Chapter 15 cases).

U.S. Licensees Invoke Section 365(n). Following the Bankruptcy Court’s supplemental order, certain U.S. licensees asserted Section 365(n) rights in an attempt to retain their rights to the intellectual property that Qimonda had licensed them.

The Bankruptcy Court’s Decision. In November 2009, Judge Mayer issued the first decision on the issue, agreeing with Qimonda’s administrator and modifying the prior supplemental order to exclude the effect of Section 365(n). Judge Mayer provided that Section 365(n) would apply only if the administrator “rejects an executory contract pursuant to Section 365 (rather than simply exercising the rights granted to the Foreign Representative pursuant to the German Insolvency Code).”

Appeal To The District Court. The licensees appealed to the District Court, which remanded the case back to the Bankruptcy Court.

  • The District Court ordered the Bankruptcy Court to consider the requirement under Section 1522(a) of the U.S. Bankruptcy Code to ensure that “the interests of the creditors and other interested entities, including the debtor, [were] sufficiently protected.” The District Court held that the Bankruptcy Court had to balance the relief granted to the German insolvency administrator as foreign representative with the interests of those affected by that relief.
  • As a separate basis for remand, the District Court directed the Bankruptcy Court to consider whether Section 365(n) is a fundamental U.S. public policy such that, under Section 1506 of the U.S. Bankruptcy Code, subordinating it to Section 103 of the German Insolvency Code would be “manifestly contrary to the public policy of the United States.”

The Bankruptcy Court On Remand. On remand, another Bankruptcy Judge, Stephen S. Mitchell, held a four-day evidentiary hearing, with testimony on the likely impact of applying, or not applying, Section 365(n) to licenses under Qimonda’s U.S. patents. At the outset, the administrator had committed to re-license the licensees under a “reasonable and nondiscriminatory” royalty license (known as RAND), but the licensees pressed to keep their existing license rights without having to negotiate and pay a new royalty. At stake for the Qimonda estate was approximately $47 million in estimated re-licensing fees. The licensees argued the stakes were far higher on their side. They contended that a failure to apply Section 365(n) would destablize the system of licensing and cross-licensing in place to address the “thicket” of multiple patents held by different parties in the semiconductor industry, and in turn that would reduce investment and innovation.

Ultimately, the Bankruptcy Court issued its decision and, under Section 1522(a), balanced the interests of Qimonda and the licensees in favor of requiring that Section 365(n) apply to the administration of Qimonda’s U.S. patents. Taking up the other issue raised by the District Court, the Bankruptcy Court independently held that “deferring to German law, to the extent it allows cancellation of the U.S. patent licenses, would be manifestly contrary to U.S. public policy.” Under Section 1506, the Bankruptcy Court concluded that U.S. public policy required that Section 365(n)’s protections apply to Qimonda’s U.S. patents.

The Fourth Circuit’s Decision. After procedural hurdles were cleared, a direct appeal to the Fourth Circuit followed. On December 3, 2013, the Fourth Circuit issued its 45 page opinion affirming the Bankruptcy Court’s decision to apply Section 365(n). After first examining the history, purpose, and structure of Chapter 15, the Fourth Circuit turned to the three arguments the German administrator had advanced on appeal.

  • No request for Section 365(n) to apply. The administrator argued that in seeking discretionary relief under Section 1521, he had never asked for either Section 365 or 365(n) to apply; since relief under Section 1521 has to be requested by the foreign representative, he asserted that his decision not to request it should resolve the question. The Fourth Circuit rejected the argument, holding his view of the relationship between Sections 1521(a) and 1522(a) “too myopic.” Instead, it held that if any discretionary relief is granted under Section 1521(a), the interests of creditors and the debtor must be “sufficiently protected” under Section 1522(a).
  • Erroneous test under Section 1522(a). The administrator next argued that the “sufficiently protected” standard is designed only to make sure that all creditors can participate in the foreign proceeding on an equal footing, not to change the substantive outcome in that foreign proceeding. Reviewing the Guide to Enactment of the Model Law on which Chapter 15 is based, the Fourth Circuit also rejected this argument. It held that Section 1522(a) requires a balancing of interests before discretionary relief is granted, and anticipates a particularized analysis of the impacts on creditors and the debtor from the relief sought.
  • Faulty balancing analysis. Finally, the administrator argued that the Bankruptcy Court abused its discretion in balancing the interests involved. Specifically, he asserted that the lower court overstated the risk to the licensees’ investments made in reliance on the licenses that Qimonda had granted, especially given the administrator’s RAND license offer. The Fourth Circuit rejected this argument as well, agreeing with the Bankruptcy Court’s assessment of the risks. These included the risks to investments already made and the threat of infringement litigation contrary to the Qimonda licenses. The Fourth Circuit also held that although the RAND proposal would reduce the licensees’ risks, it would not sufficiently protect them. The outcome of those negotiations were uncertain, there were significant hold-up risks in the RAND license negotiations. Moreover, it was unclear whether even new RAND licenses would survive if the administrator sold the patents in the German proceeding — and the purchaser later filed an insolvency proceeding under German law.

In the final section of the decision (Part IV), the Fourth Circuit returned to the purposes of Chapter 15 and Section 365(n). It stated that in affirming the Bankruptcy Court’s decision based on Section 1522(a), it was also indirectly furthering the public policy behind Section 365(n). However, the Fourth Circuit did not reach Section 1506. Unlike the Bankruptcy Court, the Fourth Circuit did not hold that subordinating Section 365(n) to Section 103 of the German Insolvency Code would be “manifestly contrary to the public policy of the United States.” Interestingly, Part IV of the opinion only got two votes. Circuit Judge Wynn concurred in the judgment and in the first three parts of the decision, but not in Part IV, which he found to be “unnecessary dictum.”

Where Does The Decision Leave Licensees? While plainly good news for the Qimonda licensees, who can now use Section 365(n) to retain their pre-existing IP rights, the Fourth Circuit’s decision leaves a number of unanswered questions for future cases.

  • Is a decision allowing a foreign representative to reject licenses without applying Section 365(n) protection “manifestly contrary to the public policy of the United States” under Section 1506? The Bankruptcy Court thought it was, but the Fourth Circuit carefully chose not to reach the issue. It remains an open question even in the Fourth Circuit, much less in Chapter 15 cases filed in the rest of the country. Section 1506, quoted below, is so important because it’s Chapter 15’s local law trump card:

Nothing in this chapter prevents the court from refusing to take an action governed by this chapter if the action would be manifestly contrary to the public policy of the United States.

By declining to reach the Section 1506 question, the Fourth Circuit kept the Section 1506 trump card in the deck. That leaves licensees with continued uncertainty about whether Section 365(n) will in fact be applied in the next Chapter 15 case.

  • Must courts apply Section 365(n) every time a foreign representative requests any discretionary relief under Section 1521? The Fourth Circuit’s decision required courts to balance the particular interests of creditors and the debtor under Section 1522(a), not just their access to the foreign court. To coin a phrase, this means “substantive sufficient protection” instead of just “procedural sufficient protection.” The Qimonda decision should help licensees tip the balance in their favor, especially when a foreign representative is asking to administer U.S. patents. However, the Fourth Circuit holding was that the Bankruptcy Court’s exercise of discretion was reasonable. It did not hold that no other decision was possible. That makes it a little less clear whether the Fourth Circuit would allow this particularlized balancing to go the other way — a refusal to apply Section 365(n) — in another case.
  • What if the foreign representative doesn’t seek any discretionary relief? Remember, the Fourth Circuit affirmed the Bankruptcy Court only under Section 1522(a), which in turn applies only when a foreign representative requests discretionary relief under Section 1521 (or relief under Section 1519 before recognition).  Most foreign representatives will seek discretionary relief, and specifically seek to have U.S. assets entrusted to them. That is what Qimonda’s German administrator did. However, if a foreign representative decided not to request any such relief, the balancing of interests called for by the Fourth Circuit would not be triggered. That could leave licensees with only Section 1506’s public policy trump card, which the Fourth Circuit did not invoke.
  • What if the foreign representative doesn’t file a Chapter 15 case at all? This one is pretty easy. If the foreign representative chooses not file a Chapter 15 case in the first place (or of course a Chapter 11 or Chapter 7 case), then there would be no U.S. bankruptcy case in which to try to invoke Section 365(n). That’s one of Section 365(n)’s major limitations, and one licensees — and the attorneys who draft their licenses — should remember.

Conclusion. The Fourth Circuit’s Qimonda decision is important for licensees of intellectual property owned by a foreign entity. It signals that U.S. courts will incline to protect licensees by applying Section 365(n) when an insolvent foreign entity’s administrator or other representative asks for assistance from the U.S. bankruptcy courts. However, the Fourth Circuit did not go as far as some licensees would have liked, stopping short of declaring that an attempt to reject licenses without applying Section 365(n) would be “manifestly contrary” to U.S. public policy. That makes the Qimonda decision a helpful, but perhaps not decisive, tool for IP licensees. It of course remains to be seen whether other courts will follow the Qimonda decision or chart a different path.

Business Bankruptcy Issues Recent Developments

Major Amendments To The CCAA, Canada’s Reorganization Law, Are Now In Force

In a post last year entitled "North Of The Border: Reorganization Under Canada’s Companies’ Creditors Arrangement Act," I discussed the various types of bankruptcy and insolvency proceedings available under Canadian law. Included in the discussion was the Companies’ Creditors Arrangement Act, known as the CCAA, used by many Canadian companies to reorganize. At that time, although significant amendments had been enacted to the CCAA and other Canadian bankruptcy laws, those amendments had not "come into force," the final act necessary under the Canadian system before the changes in the law would become effective.

That changed on September 18, 2009, when these revisions to the CCAA and to the Bankruptcy and Insolvency Act, or BIA, finally came into force (joining a few other changes that came into force in July 2008). Canadian bankruptcy law has now been modified in a number of important ways, applicable to cases filed going forward.

For more on the new law, and Canadian bankruptcy issues generally, be sure to check out the website of the Office of the Superintendent of Bankruptcy Canada.

Business Bankruptcy Issues

North Of The Border: Reorganization Under Canada’s Companies’ Creditors Arrangement Act

With the enormous amount of business between the United States and Canada these days, it’s little wonder that from time to time U.S. companies find themselves affected by a Canadian insolvency proceeding. A better understanding of Canada’s approach to bankruptcy and insolvency law can be helpful when sizing up how such a filing might affect your rights.

The Lay Of The Land. Canada has two primary federal insolvency acts, the Bankruptcy and Insolvency Act, known as the BIA, and the Companies’ Creditors Arrangement Act, known as the CCAA. (A third statute, the Winding-up and Restructuring Act, is less frequently invoked.) You can access the text of each of three acts by clicking on the preceding links. These national statutes also operate in conjunction with applicable provincial law.

Canada’s Reorganization Law. When larger Canadian companies need protection from creditors they often seek relief under Canada’s CCAA. The CCAA is the Canadian insolvency law most analogous to Chapter 11 of the U.S. Bankruptcy Code. Company management generally remains in charge as a debtor in possession, although a monitor is appointed and has certain oversight authority. Unlike the much longer U.S. Bankruptcy Code, the CCAA currently has only 22 sections, leaving it to the courts to fill in the gaps. Courts generally do so, including issuance of an early "initial order" that commonly implements a stay similar to the automatic stay of U.S. bankruptcy  law. (Click on the link for an example of an initial order.) Other court orders permit contracts and leases to be disclaimed (rejected), assets to be sold, and a restructuring to be implemented through a plan of arrangement after voting by creditors.

Cross-Border Issues. Canada has not yet adopted the Model Law on Cross-Border Insolvency, which the U.S. did in 2005 as Chapter 15 of the U.S. Bankruptcy Code. At least for now, Canada continues to use its own cross-border procedures under Section 18.6 of the CCAA and cross-border protocols used to coordinate proceedings in different countries. (For more on Chapter 15, you may find this prior post entitled "Chapter 15: The Bankruptcy Code’s New Cross-Border Insolvency Rules," of interest.)

Important Changes May Be Coming. Canada is currently working on adoption of significant revisions to its bankruptcy and insolvency laws. The legislation was originally proposed in 2005 as Bill C-55, and more recently was approved in legislation known as Bill C-12.  If it comes into force, this law would make a number of changes, including one of interest to licensees of intellectual property. The legislation would add to the CCAA a formal provision akin to Section 365(n) of the U.S. Bankruptcy Code, protecting the rights of licensees to continue to use licensed intellectual property if the underlying license agreement is disclaimed (rejected) in the CCAA proceeding.

Conclusion. Navigating Canadian insolvency law can be complex, especially when proceedings are pending in both the U.S. and Canada. Getting advice from U.S. and Canadian bankruptcy counsel can prove invaluable if your business becomes involved in an insolvency proceeding north of the border.   

Business Bankruptcy Issues The Financially Troubled Company

Licensing Intellectual Property From An Israeli Company: What Happens If There’s A Bankruptcy?

Many technology companies are based in Israel and license intellectual property to companies in the United States and around the world. This raises an interesting question: what happens if the Israeli company, as licensor, goes into bankruptcy or liquidation in Israel? The latest edition of Cross Border Commentary, a publication by the International Business Practice of my firm, Cooley Godward Kronish LLP, has just addressed that very question.

The U.S. Law Answer.  Before turning to Israeli law, let’s look at how this issue plays out under the United States Bankruptcy Code. A licensor in bankruptcy or its bankruptcy trustee has the option of assuming (keeping) or rejecting (breaching) a license. Generally, a debtor licensor can assume a license if it meets the same tests (cures defaults and provides adequate assurance of future performance) required to assume other executory contracts.  Many licensees will not have a problem with assumption of their license as long as the debtor can actually continue to perform. Instead, the real concern for licensees is the fear of losing their rights to the licensed IP, which often can be mission critical technology, if the license is rejected.

  • Special protections. Recognizing this concern, the United States Bankruptcy Code, in Section 365(n), provides licensees with special protections.  If the debtor or trustee rejects a license, under Section 365(n) a licensee can elect to retain its rights to the licensed intellectual property, including even a right to enforce an exclusivity provision. In return, the licensee must continue to make any required royalty payments. The licensee also can retain rights under any agreement supplementary to the license, which includes source code or other forms of technology escrow agreements.  Taken together, these provisions protect a licensee from being stripped of its rights to continue to use the licensed intellectual property.
  • Watch out for trademarks. While many people would expect intellectual property to include trademarks, the Bankruptcy Code has its own limited definition of "intellectual property." The bankruptcy definition includes trade secrets, patents and patent applications, copyrights, and mask works.  Importantly, however, it does not include trademarks. This distinction means that trademark licensees enjoy none of Section 365(n)’s special protections and those licensees are at risk of losing their trademark rights in a bankruptcy. 

For more on these subjects, you may find these earlier posts, "Intellectual Property Licenses: What Happens In Bankruptcy?" and "Trademark Licensor In Bankruptcy: Special Risk For Licensees" of interest.

The Israeli Perspective. An article in Cooley’s Cross Border Commentary, prepared by Einat Meisel of the Israeli law firm of Gross, Kleinhendler, Hodak, Berkman and Co., discusses a Tel-Aviv District Court decision involving these issues. When an Israeli company known as Commodio Ltd. entered liquidation, two of its intellectual property licensees sought to retain rights under their license agreements with Commodio. In ruling on the effort, the Israeli court made several important holdings:

  • The licensees could continue to use the IP as long as they made required any royalty payments and complied with the terms of use in the agreements, with payments to be made to the liquidator.
  • The licensees could gain access to the underlying source code behind the object code covered by their licenses provided this did not impose substantial expense on the company in liquidation.
  • No transfer of ownership in the IP could occur due to the liquidation, as this would be contrary to Israeli bankruptcy law.
  • A right of first refusal covering certain of the intellectual property would be enforceable in the bankruptcy.

Comparison To A U.S. Bankruptcy. With a few key differences, the outcome in the Commodio case is similar to the treatment under U.S. law. Under Section 365(n)’s provisions, licensees would have the ability to retain their rights to the IP, with any royalty payments being made to the bankruptcy estate. If an agreement contained a source code license, the licensees could also access the source code under Section 365(n). However, absent a license grant to the source code, the outcome would likely be different in a U.S. bankruptcy.  Provisions purporting to transfer ownership of the IP upon a bankruptcy or liquidation would not be enforceable in a U.S. bankruptcy. Finally, the right of first refusal enforced in the Israeli case might not be enforced in a U.S. bankruptcy if the agreement were rejected but could if the license were assumed. 

Get Advice. Licensing intellectual property from a foreign corporation raises a number of issues, including what happens if the foreign licensor goes bankrupt or becomes insolvent. Potential licensees should be sure to get expert advice on the applicable foreign law, including the implications of bankruptcy, when licensing IP from a foreign company. Although licensees from Israeli companies can find some comfort in the Commodio decision, it remains important to get advice on Israeli law specific to your situation. 

Business Bankruptcy Issues Recent Developments

New Developments In The Cayman Islands Hedge Fund Chapter 15 Case

In a post earlier this month, I reported on the August 30, 2007 decision by Judge Burton R. Lifland of the U.S. Bankruptcy Court for the Southern District of New York denying Chapter 15 recognition to foreign proceedings pending in the Cayman Islands for two Bear Stearns hedge funds. In the August decision (available here), the Bankruptcy Court held that although the two hedge funds were organized under the laws of the Cayman Islands, their business operations were in New York and not in the Cayman Islands, which essentially served as a "letter box."

The Involuntary Bankruptcy Option. After denying recognition, the Bankruptcy Court indicated that an alternative path would be for the foreign representatives to file an involuntary bankruptcy petition. The Bankruptcy Court noted that Section 303(b)(4) of the Bankruptcy Code, permitting a foreign representative to file an involuntary bankruptcy petition, had not been repealed when Chapter 15 was enacted. The foreign representatives were given time to pursue that option.

An Amended Opinion To Note An Inconsistency. A few days later, on September 5, 2007, Judge Lifland issued an amended opinion (available here) adding an interesting footnote on that very issue. In it, he suggested that the failure to repeal the involuntary bankruptcy provision may have been a mistake. Here’s the new footnote 15 to the amended opinion:

It would appear that the failure to repeal section 303(b)(4) along with section 304 may be a drafting error in view of the newly enacted section 1511(b) which likewise addresses the commencement of a case under sections 301 and 303. The inconsistencies of the two statutes have not been conformed.

The footnote did not change the decision but it raises a question whether the filing of an involuntary case after denial of Chapter 15 recognition is consistent with the intent of Chapter 15’s changes to the Bankruptcy Code. If the failure to repeal that section was truly a mistake, fixing it would mean that without Chapter 15 recognition, a foreign representative couldn’t obtain any bankruptcy protection in the United States.

The Foreign Representatives File A Motion For Stay Pending Appeal. On September 21, 2007, the foreign representatives for the two hedge funds filed an appeal from the decision and also a motion for stay pending appeal (click on link for a copy). The motion sought to have the order dissolving the stay of litigation against the two funds itself stayed until the appeal is resolved. In addition to arguing that the Bankruptcy Court’s decision was in error, the motion stated that the involuntary bankruptcy option was too expensive and could subject the hedge funds to competing main proceedings, one in the United States and one in the Cayman Islands, each with their own legal obligations.

Conditional Stay Granted Pending Appeal. According to media reports, at a hearing held on September 24, 2007, the Bankruptcy Court granted the motion to stay subject to the return to the United States of funds that had been transferred to the Cayman Islands in connection with the foreign proceedings. Stay tuned.

Business Bankruptcy Issues Recent Developments The Financially Troubled Company

A UK Perspective On The Turmoil In The Credit Markets

On his Insolvency Blog, Chris Laughton, a recovery and insolvency partner at the UK’s Mercer & Hole firm of chartered accountants, gives a UK and European perspective on the recent gyrations in the credit markets. His new post is entitled "The boom-bust cycle: where are we now?" and it chronicles the progression of the credit crunch from the United States to the UK and beyond. 

After providing links to a number of recent articles from the UK press on the subject, Chris sums up his views:

So what does all this mean? Yes the capital markets are in turmoil, banks are lending much more cautiously and some high risk investment vehicles are failing, but essentially this is only a liquidity problem. Its effect though is that stressed businesses will no longer be able to borrow their way out of trouble as they have become hard-wired to do over the last 3 years.

Crisis cash management and operational and corporate restructuring will come back into vogue as refinancing becomes passé. Only if stressed businesses fail to seek appropriate and timely assistance will the business insolvency statistics really start to rise.

His informative post, and the UK articles highlighted, underscores the interconnected nature of today’s global credit markets. It makes for interesting reading — wherever you are.